Goldman Sachs Is Positive On Hornbeck Offshore Services Following Deepwater Drilling Approval

With the first deepwater drilling permit since the moratorium being issued this week, Goldman Sachs has even greater confidence in its Conviction Buy call on Hornbeck Offshore HOS. Goldman is raising its 6-month price target from $29 to $32, which is consistent with Hornbeck's net asset value. Hornbeck is the most levered company in Goldman's coverage to a recovery in the US Gulf of Mexico. The permit issued to NBL is a step in the right direction towards reaccelerating activity in the US Gulf and gives Goldman greater confidence in its utilization forecasts for HOS. Goldman Sachs 19% above consensus 2012 EBITDA forecast of $235 million is based on the view that 15-20 deepwater rigs will be working in the US Gulf of Mexico by late 2011 and 25 by mid-2012. This is likely not aggressive considering that 25 rig years are under contract in the US Gulf of Mexico for 2011. This should allow Hornbeck to put roughly 10-12 boats back to work by mid-2012. HOS closed Tuesday at $27.94